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A Big Upgrade for Buffalo Wild Wings

This bullish call comes from more than just one analyst.

After spending much of the past year and a half at a mediocre three-star rank, Buffalo Wild Wings(Nasdaq: BWLD) has impressed enough top-performing members of our 165,000-strong Motley Fool CAPS community recently to inch into four-star territory. The increased optimism follows a big drop in share price, so let's see what the 4,598 members who rate the restaurant operator have to say about the stock.

While competing restaurants such as Panera Bread(Nasdaq: PNRA) and fast-food joints McDonald's(NYSE: MCD) and Chipotle(NYSE: CMG) all posted positive same-store sales in the first quarter, Buffalo Wild Wings turned in essentially flat comps for the same period. But the 15% jump in revenue and the earnings growth of 25% during a time of record-high chicken wing costs has given some CAPS members reason to maintain their bullish stance on the company's long-term prospects.

An uptick in business among other restaurants could be a sign of increased consumer appetite for spending a little more money dining out. The Cheesecake Factory(Nasdaq: CAKE) reported a big increase in first-quarter guest traffic along with an 86% jump in earnings and BJ's Restaurants(Nasdaq: BJRI) also generated surging earnings -- both strong signals that restaurants can still grow today.

Some CAPS members remain convinced there's potential for continued growth through Buffalo Wild Wings' expansion plans, with a long-term goal of 1,000 locations in the U.S. and a unit growth target for 2010 of 13% to 15%. It's not the only restaurant moving ahead with growth plans; BJ's Restaurants is eyeing double-digit capacity growth in 2010 and 2011 as well.

Investors also think Buffalo Wild Wings' conservative balance sheet increases its chances of success. While fast-food chain Wendy's/Arby's Group(NYSE: WEN) has about doubled its debt to $1.5 billion since March 2008 and has been making debt-financed stock repurchases, Buffalo Wild Wings has a debt-free balance sheet with about $67 million in cash and marketable securities. With the recent earnings report shaking many investors out of the stock, many CAPS members are taking a contrarian view and see a high-growth stock with a reasonable valuation in Buffalo Wild Wings.

Do you think Buffalo Wild Wings should be a four-star stock? Add your thoughts in the comments box below on this page, or head over to CAPS to rate the company and check out all the information the community offers.

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